The Pakistani government has proposed three additional taxation measures to generate Rs36 billion, aiming to compensate for revenue losses from a 10% public sector salary hike and reduced GST on solar panels. The measures include a 10% federal excise duty on poultry day-old chicks, an increased tax rate (25% to 29%) on mutual fund dividends from debt income, and a higher withholding tax (15% to 20%) on profits from government securities for institutional investors. These steps follow IMF pressure to adhere to the agreed fiscal framework for the 2025-26 budget.
However, the IMF has expressed dissatisfaction with the Finance Ministry and FBR’s revenue projections, urging more accurate calculations to avoid a potential mini-budget. The Fund estimates the salary increase will cost Rs29-30 billion, while the GST reduction on solar panels—from 18% to 10%—will slash projected revenues by Rs6-8 billion. Without corrective measures, the Rs36-38 billion gap could destabilize the budget’s financial targets.
FBR Chairman Rashid Mahmood Langrial presented these adjustments to the National Assembly’s Standing Committee on Finance, revealing that the new taxes would be incorporated into the amended Finance Bill. The FBR has already outlined Rs312 billion in new taxes and Rs389 billion in enforcement measures for 2025-26. After accounting for the solar panel tax cut, the net revenue impact stands at Rs339.5 billion.
The committee approved the Finance Bill with Senate recommendations, but challenges remain. Langrial highlighted a Rs35-36 billion deficit, including Rs12 billion from salary hikes and Rs8.5 billion from solar tax cuts. The government also faces NFC Award obligations to provinces. While six tax proposals were shared with the IMF, only three were approved, including a standardized 10% tax rate on local and imported cotton. The move underscores Pakistan’s tightrope walk between fiscal consolidation and economic pressures.